By Walden Bello

Civil society groups that regard the coming WTO Ministerial in Hong Kong as condemned to producing a deal that can only be detrimental to the interests of developing countries were cheered by the failure of the recent World Trade Organization (WTO) General Council meeting in late July to arrive at substantive agreements in any of the critical areas of negotiations: agriculture, non-agricultural products, and services.

Indeed, most observers, including the media, have largely characterized the inability to produce the "July Approximations" as a significant setback to securing a successful ministerial in Hong Kong in December. The statements of key WTO players appear to lend weight to this. Outgoing Director General Supachai Panitchpakdi's remark that the state of the talks was "disappointing but not disastrous" was taken by some to be, in fact, a rather euphemistic assessment to mask a really gloomy state of affairs. So was the statement of General Council Chairperson Ambassador Amina Mohamad of Kenya that "there is not a 'crisis' in the negotiations-we need not press the panic button."

One has the strong suspicion, however, that these statements are less descriptions of the actual state of play of the negotiations than rhetorical exhortations to spur delegates to hurry up in what is, in fact, a process that has gone beyond stalemate.

It is certainly a relief that the July Approximations could not be put together. But how much of a setback was it? Are the delegations, in fact, really that far apart at this point?

Certainly, in the areas of interest to developing countries, such as special and differential treatment (SDT) and implementation, there has been hardly any movement. Special and differential treatment, for instance, can't move because of the European Union's (EU) intransigent position that any progress in the talks is contingent on agreement from the developing country bloc that the more advanced developing economies such as India and China must be graduated from the ranks of those qualified for SDT treatment. Most developing countries see this as mainly a feint to divide them against one another in order to eliminate SDT as an operative principle in the WTO.

Mode 4: a dealmaker?

But there is worrisome movement in the other areas, those in which developed countries have a lot of interest. Take services. Much has been made recently about developing country resistance to the European Union's proposal of "benchmarking"-that is, to create quantitative and qualitative criteria of genuine and significant market opening that services requests would have to meet to be valid offers. Yet the numbers seem to be telling a different story about developing country positions. There are now some 70 initial offers representing 95 member countries and around 30 revised offers on the table-certainly a big leap from the 47 countries that had made offers at the beginning of this year. Developed country governments have been dismissive, saying that a substantial number of these offers were not significant in terms of significant market openings, but that is largely a negotiating ploy. What is more likely is that some of the developing countries making offers are saying they want to deal, but they won't really show their cards until the developed countries make serious gestures, such as on the so-called Mode 4 of the General Agreement on Trade in Services (GATS), which pertains to the movement of natural persons.

For instance, India, a significant exporter of labor to northern countries, apparently sees Mode 4 as the centerpiece of its overall negotiating strategy, and Mode 4 concessions by the EU and the United States in the form of more liberal entry and stay of skilled labor are likely to make the government more pliable in the negotiations in agriculture and industrial tariffs. As Focus on the Global South analyst Benny Kuruvilla notes, "India's demands on Mode 4 are actually quite tame - it's happy if the US binds its existing commitments in the H-1 B working visa category. There is a real danger that the US might hold on for a while, then give in, at which point India will only be to happy to compromise on other issues."

But India is not the only country with an inordinate interest in Mode 4 liberalization. Other significant labor exporting countries such as the Philippines and Bangladesh see Mode 4 concessions by the US and EU as important and with likely implications on their positions on other issues.

The US official line at this point is that it does not have much flexibility when it comes to Mode 4, a statement that is partly meant for domestic consumption owing to strong anti-immigrant sentiment in the country. But this is largely a negotiating position since, as services expert Tony Clarke of Polaris Institute puts it, "there's no question that the US and EU want to operationalize Mode 4 because of the interest of their client corporations to maximize cheap labor opportunities. Indeed, the US Coalition of Service Industries is lobbying Washington hard to liberalize the entry of skilled labor. For all these reasons, warns Clarke, "Mode 4 could turn out to be either the 'dealmaker' or the 'dealbreaker.'"

No movement in NAMA?

Is there really no movement in the area of Non-Agricultural Market Access (NAMA)? Again, as in services, on the surface the negotiations appear to have been marked by loud disagreements over formulas for tariff cuts, the issue of binding tariffs, and the application of the principles of less than full reciprocity and special and differential treatment. However, if we look more closely, there are disturbing signs of a convergence occurring:

despite much initial grumbling after the 2004 July Framework deal, the developing countries have accepted the "Derbez text", which they rejected in Cancun, as the basis of negotiations, as proposed by the Framework;

there is now consensus on a non-linear Swiss or Swiss-like formula for tariff reduction, which would apply to all products and subject higher tariffs to greater proportional cuts than lower tariffs, thus disadvantaging many developing countries, which maintain relatively higher tariffs on many key industrial goods than developed countries. A Uruguay Round formula, which would stipulate an average tariff cut across industry but leave it up to national authorities to determine the rate for particular products, is not even in discussion, although developing countries, confronted with a choice, would see it as less objectionable than the Swiss formula.

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